Alaska Air to acquire Hawaiian Airlines

Alaska Air Group (ALK) has announced that it will acquire its rival Hawaiian Holdings (HA) in a deal valued at $1.9 billion, including debt.

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The partnership formed with Hawaiian will give Alaska Air, valued at $5.1 billion, the ability to control more than 50% of the market for flights to Hawaii, one of the world's most popular tourist destinations.

Under the agreement, Alaska Air will pay $18 in cash per share, which is approximately four times Hawaiian's closing price on Friday. This massive premium reflects the difficult period that Hawaiian shares have been going through.

The Maui wildfires that occurred in recent months, high fuel costs, and recall issues experienced with some of Hawaiian's Airbus SE aircraft have led to heavy losses and a 65% drop in the share price over the last 12 months.

As US regulators are opposing in court the $3.8 billion bid proposed by JetBlue Airways (JBLU) to acquire Spirit Airlines (SAVE), it is inevitable that the Hawaiian deal will be subject to antitrust scrutiny.

Antitrust enforcers are quite skeptical of mergers between smaller airlines, even though 80% of the US aviation sector is controlled by four players: United Airlines (UAL), American Airlines (AAL), Delta Air Lines (DAL), and Southwest Airlines (LUV).

As part of their efforts, lawmakers were successful in July in ensuring that JetBlue abandoned a three-year alliance with American Airlines.

News Source: 12punto